Working Paper: NBER ID: w28883
Authors: Paula A. Calvo; Ilse Lindenlaub; Ana Reynoso
Abstract: We develop a new equilibrium model in which households’ labor supply choices form the link between sorting on the marriage market and sorting on the labor market. We first show that in theory, the nature of home production—whether partners’ hours are complements or substitutes—shapes equilibrium labor supply as well as marriage and labor market sorting. We then estimate our model using German data to empirically assess the nature of home production, and find that spouses’ home hours are complements. We investigate to what extent complementarity in home hours drives sorting and inequality. We find that home production complementarity strengthens positive marriage sorting and reduces the gender gap in hours and in labor sorting. This puts significant downward pressure on the gender wage gap and on within-household income inequality, but fuels between-household inequality. Our estimated model sheds new light on the sources of inequality in today’s Germany, and—by identifying important shifts in home production technology toward more complementarity—on the evolution of inequality over time.
Keywords: marriage market; labor market; sorting; inequality; home production
JEL Codes: D1; J01; J12; J16; J24; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| home production complementarity (D13) | positive sorting in marriage market (J12) |
| home production complementarity (D13) | positive sorting in labor market (J79) |
| positive sorting in marriage market (J12) | reduced gender wage gap (J79) |
| positive sorting in labor market (J79) | reduced gender wage gap (J79) |
| home production complementarity (D13) | reduced within-household income inequality (D31) |
| home production complementarity (D13) | increased between-household inequality (D31) |
| technological changes in home production (O33) | decline in gender wage gap (J79) |
| technological changes in home production (O33) | decline in within-household inequality (J12) |
| increased complementarity in childcare among couples (J12) | changes in sorting patterns in marriage market (J12) |
| increased complementarity in childcare among couples (J12) | changes in sorting patterns in labor market (J29) |